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Three Things That Determine the Likelihood of Your Next Sale

Written by Ian Renton on 02/07/2014 9:00:00 AM 1 Comment
Look For Easy Sales – Part 2Three_Things_That_Determine_the_Likelihood_of_Your_Next_Sale

Apart from the actual products and services sold, the three most important things that determine the likelihood of getting the next sale from your current list of customers are…

In part one of Look For Easy Sales, I revealed that the easiest sales you will ever make are to your existing customers. However, you shouldn’t get complacent when dealing with your customers so you should only pitch relevant and interesting offers to them. Cross-selling and up-selling should be encouraged and your Bartercard customers are especially predisposed to receive such offers.

Apart from the actual products and services sold, the three most important things that determine the likelihood of getting the next sale from your current list of customers are

1. Recency
2. Frequency
3. Monetary

In other words, (1) the time of the last purchase, (2) the number of purchases of your products and services purchased and importantly, (3) the value of the products and services offered. In fact, I know of some businesses that do sophisticated modelling on this concept.

Basically, it goes like this. Assign a number to a customer based on how recent their last order has been with the most recent orders rating as the top mark. Using a scale of 1-7 rank your customer base:

• A mark of 7 - to a customer that purchased in the last three months
• A mark of 6 - to a customer that ordered from 3-6 months ago
• A mark of 5 - to a customer that ordered 6-9 months ago
• A mark of 4 - to a customer that ordered 9-12 months ago
• A mark of 3 - to a customer that ordered 1-2 years ago
• A mark of 2 - to a customer that ordered 2-3 years ago
• A mark of 1 - to a customer that ordered over 3 years ago

A similar ranking system could be devised for frequency of purchases and the monetary value of those purchases over a fixed period of time.

I must say I only partially adopt this model. I base my marketing on the products and services sold in the past, emphasising recency and consider the monetary aspect too. If your marketing is targeted according to relevant products and services, then it should be possible to make a profit out of marketing to these customers even if their last order was not that recent. Of course, the more recent the purchase, the more likely or the easier it is to attain a repeat sale.

Firstly, you must consider the period of time for your products and services. Obviously, a drycleaner is going to get a repeat sale much more quickly than a car dealer. Be careful about automating your marketing too much. It is great to look at individual circumstances of each customer. In fact, one of my big success stories in increasing my customer retention over recent years has been with telemarketing.

This gives you the opportunity to get to know your customers. As well as obtaining a sale, telemarketers also can help make your other forms of marketing such as direct mail more effective. You see, there is a lot of clutter in marketing today. Most people receive thousands of marketing messages per day so your marketing really needs to be targeted accurately to give you the best return. When your telemarketer calls your customers, not only can they attempt to get a sale but they can also find out when your customer is likely to order again and when they would like to be contacted. Imagine that. You actually contact your customers when they want you to.

The point here is that just because your customers have ordered previously, does not automatically mean they will order again. This complacency is perhaps one of the biggest weaknesses I see in business today. Businesses tend to complain about sales being down or hard to get but they are still not actively trying to build up their repeat business. When new customers, clients, members or patients are acquired, your work is only just beginning. New customers must be nurtured over the long term so they become regular buyers.

Recency
If you study recency as a contributing factor to gaining more repeat business, and I suggest you do, then you must adapt this model to your circumstances. Study your customers’ buying history to find out when your customers are most likely to buy and this will make your business more efficient and drive your marketing dollar further. Secondly, do not hesitate or wait too long to contact your customers for a new order as the longer you wait, the more chance your competitors have to step in and steal your customers away from you.

Frequency
Frequency refers to how often your customers buy from you. The upside of having frequent buyers is that you are consistently in these customers’ minds and that is a good thing. The infrequent buyers need to be contacted more often to make sure you stay top of mind. Those in the service industry such as dentists and automobile service companies have similar business models and rely on regular checkups and more expensive services from time to time. Nothing is better than frequent, predictable, profitable sales. Again, these sales should not be taken for granted. You should contact your client either before or after their next service is due.

Monetary
The Monetary part of the Recency-Frequency-Monetary model is the most important provided the last purchase was relatively recent. This fits in nicely to the 80-20 rule which states that 80% of your sales are likely to come from 20% of your customers so more marketing resources should be allocated to these top 20% of your customers.

The impact for Bartercard members is that the Recency-Frequency-Monetary model is likely to reveal that your Bartercard customers will score very highly on such a test and as result are likely to respond to your marketing and that is what you want.

Author: Ian Renton
Managing Director
Australian Christmas Cards

sales@austchristmascards.com.au
www.austcredit.com.au
www.austchristmascards.com.au
www.rentonslabels.com.au
www.rentonsprinting.com.au
Phone: 1800 226 202 or 02 9631 3366

Ian Renton is the owner of four businesses, Australian Credit Stationers, Australian Christmas Cards, Renton's Labels and Renton's Printing. His businesses provide account stickers, Christmas stickers, corporate Christmas cards and e-cards, corporate birthday cards, thank you cards, calendars, fridge magnets, custom labels and general printing to thousands of businesses in Australia and New Zealand.

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Topics: Monetary, Recency, Frequency, Cross-selling, Up-selling

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